Julia Gillard, the Australia's Labour Prime Minister, has clung onto power
after forming a fragile coalition government with a majority of one seat in
the country's parliament.

The country's first woman leader, who came to office after a Labour revolt just 10 weeks ago, scraped over the line to form a government with support from the "kingmakers" after 17 days of frantic post-election talks.

After two weeks of negotiations following inconclusive election results, the country's first woman leader scraped over the line to form a government ahead of conservative rival Tony Abbott.

"Labour is prepared to govern," she said. "I believe the Australian people, given the closeness of this vote, want us to find more common ground in the national interest."

"I will work tirelessly to do what we said we would do, and that is to forge a new paradigm of modern government in this country," We are prepared to go forward to serve the Australian people. I begin this task more optimistic and more confident than ever before in the Australian people and our hopes and aspirations."

Rob Oakeshott, the last independent MP to declare his support, said today: "I will... give confidence and supply to government, and in effect that means confidence and supply in Julia Gillard.

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In a day of high drama, Mr Oakeshott and fellow independent Tony Windsor both backed Ms Gillard while a third "kingmaker", cowboy hat-wearing maverick Bob Katter, broke from their informal grouping to support Mr Abbott.

The nail-biting climax caps more than two weeks of furious horse-trading after August 21 elections produced the first hung parliament in 70 years, extending a period of unusual political upheaval.

Ms Gillard ended with 76 seats in the 150-seat parliament, with Abbott's Liberal/National coalition on 74, the closest possible margin.

"It's like a football match that's decided by one point. I think the loser is unlucky and the winner is very lucky," said Australian National University political scientist John Warhurst.

"It could have gone either way, in the end I suppose it still could have gone either way right up to the very end."

Ms Gillard staged a shock party revolt against elected prime minister Kevin Rudd in June and announced polls just three weeks later, hoping to ride a wave of public support.

But her anticipated honeymoon period failed to materialise as many voters rejected both main parties and turned to the environment-focused Greens, which enjoyed a record ballot share.

The knife-edge campaign, election and its aftermath have kept Australia's government in limbo for nearly two months, in the worst political crisis since the queen's representative sacked an elected prime minister in 1975.

The kingmakers had given few signals of which way they would fall, leaving Australia's political and media establishment on tenterhooks.

The negotiations moved up a gear in the past 24 hours with Mr Oakeshott meeting Abbott six times on Monday and receiving a package from one of the leaders early on Tuesday – while he was in the lavatory.

"Quite frankly I was in the lavatory when the other one dropped into my office and dropped some paperwork off," Mr Oakeshott said.

The obscure independents, suddenly handed a starring role in the political drama, on Monday announced parliamentary reforms agreed by both sides including having an independent speaker, rather than a member of the ruling party.

Both Mr Oakeshott and Mr Windsor said their main priority was picking the side most likely to provide a stable government capable of seeing out its three-year term and strongly backed Labor plans for a national broadband network.

Ms Gillard will now extend a reign of just 10 weeks, while Mr Abbott only narrowly failed to snatch an unlikely election victory after taking charge of a riven opposition last December.